Feds charge ex-Nicor Energy execs

SEC, U.S. Attorney say managers fraudulently inflated net income

Federal authorities on Wednesday charged four former executives of Nicor Energy LLC and an outside lawyer for fraudulently inflating sales and net income by millions of dollars so they could make earnings targets and obtain hefty bonuses.

The Securities and Exchange Commission (SEC) filed a civil enforcement action against the former senior executives, alleging they inflated net income by $11 million in 2001. In its complaint, the SEC said the former managers used improper accounting tools for the express purpose of hitting earnings targets.

Also on Wednesday, Patrick Fitzgerald, U.S. Attorney for the Northern District of Illinois, announced the indictment of three of the four executives, as well as an outside attorney for Nicor Energy. The five-count indictment says the men were part of a corporate fraud scheme to inflate revenues so they could obtain $400,000 in bonuses and other benefits.

Nicor Energy, now in liquidation, was a joint venture of Naperville-based Nicor Inc. and Texas-based Dynegy Inc. In a statement, Nicor Inc. officials said the company discovered accounting irregularities at Nicor Energy as part of a 2001 year-end audit and shared those findings with federal authorities and investors. The company said it has cooperated fully in the federal investigation.

Nicor also pointed out that Nicor Energy, a Lisle-based retail energy marketing business, had its own management team during the time period the alleged misconduct took place.

In March, Nicor said the SEC was likely to bring civil charges against Nicor Energy. The charges are not expected to have a material impact on Nicor's results, the company said Wednesday.

* John Fringer, Nicor Energy's former vice-president of power services and regulatory affairs; and

* John F. Weir, Nicor Energy's former director of gas services and major markets.

In a statement, Stephen Cutler, director of the SEC's enforcement division, said the executives deceived Nicor and Dynegy investors by providing false financial information to their corporate parent. "We will seek stiff sanctions and work closely with the U.S. Attorney's office to ensure that this serious breach of trust is addressed," he said.

Mr. Fitzgerald's indictment charges Messrs. Stoffer, Johnson and Fringer--who are expected to plead guilty to the charges--as well as lawyer Michael Munson. Each were charged with multiple counts of wire fraud, which carries a maximum penalty of five years in prison and a $250,000 fine per count.

"Corporate officials who lie in financial reports and filings put at risk both the assets and confidence of investors," Mr. Fitzgerald said in a statement. "They also put themselves at the very real risk of prosecution."